Month after month of record-breaking national home sales and price increases has prompted urgent discussions among industry leaders and commentators on how to best tackle the chronic undersupply of Canadian housing in the face of scorching homebuyer demand.
Re-examining local zoning laws and encouraging denser types of housing are a couple of the supply-side options that are on the table to help solve a problem that was impacting the market long before the pandemic, particularly in the highly-competitive Greater Toronto Area.
The changing needs of homeowners, coupled with surging prices and higher household savings, have caused buyer demand to skyrocket amid low inventory levels, according to commentary by RBC Senior Economist Robert Hogue published in a recent RBC Thought Leadership article.
Hogue suggested that Canadian policymakers should consider a variety of measures to tame the “overheating” housing market, including demand-side policies that would tighten up mortgage lending rules, in addition to options that would boost housing supply. Relaxing regulatory burdens to allow for new housing projects to be approved faster, and adjusting zoning laws to encourage more medium-density housing, Hogue said, could help to address these persistent supply issues.
In a joint statement, Christopher Alexander, Chief Strategy Officer and Executive Vice President at RE/MAX of Ontario-Atlantic Canada, and Elton Ash, Regional Executive Vice President at RE/MAX of Western Canada, pointed to the creation of more housing supply as “the real and only solution” to Canada’s housing crisis.
“We need to incentivize more development of affordable, family-sized housing such as three-bedroom condos, and allow for more detached housing beyond our existing urban boundaries,” reads the joint statement. “Realistically, we can’t continue to fight urban sprawl while simultaneously expecting housing prices to cool. It’s not feasible.”
Ben Myers, President and Owner of Bullpen Research & Consulting Inc., explained to Livabl that the GTA has been experiencing a housing supply problem for the last 20 years. In January, Myers said in a series of tweets that developers built just under 73,000 bedrooms in 2019, less than half of the 148,000 bedrooms created in 2002.
A number of factors have contributed to the reduction in housing supply coming online over time, from the scarcity of land to zoning issues. Myers explains that the City of Toronto cannot accommodate any more low-density housing despite its popularity among buyers, which will cause prices to continue rising for this type of product. Meanwhile, there are limited areas where high-density towers can be constructed.
Myers refers to Toronto’s Yellowbelt as an area that has been a topic of discussion when it comes to upping the city’s housing stock. Coined by urban planner Gil Meslin, the Yellowbelt is a large portion of land that is zoned exclusively for detached residential housing, which prevents higher-density development in communities within East York and southern Scarborough, for instance.
“So essentially in many of these neighbourhoods, you can’t even build a duplex or a triplex. You can’t even build townhomes, let alone an apartment,” said Myers. “It essentially cuts off those neighbourhoods from adding the type of density that can help reduce house prices and increase supply.”
However, despite their ability to accommodate more residents, denser types of housing are more expensive to build than low-rise options, Myers says. For one, land in dense areas is typically more expensive due to the versatility of its potential use, like as retail buildings or office towers. Concrete construction of an entire apartment building is also more expensive than a single home, which tends to use a cheaper wooden frame. Larger family-sized condo units may be less expensive to build in some ways thanks to fewer dividing walls and interior fixtures, Myers explains, but they also typically sell at a lower price-per-square-foot than smaller units and come with higher development charges.
“When you’re building an apartment, you can’t just build one apartment, you have to build the entire building,” he said.
In order to increase supply, Myers says the city needs to do away with single-family-only zoning and any restrictions on constructing four-storey residential buildings. Four-storey buildings can provide several apartments inside and be built in a way that maintains the appearance of a single-family dwelling, reducing concerns around changing the architectural character of a neighbourhood. Revising the planning consultation process so it becomes more democratic and encouraging public participation could also make a difference, Myers says.
Transit has the potential to stimulate housing supply too. According to Myers, bringing transit out to underserved communities makes these regions more desirable, drawing interest from buyers and developers. Whenever transit is built, Myers says that these regions should also be up-zoned to allow for high-rise residential projects.
“You can’t just add a subway line and keep the areas [as] neighbourhoods where you can only build single-family homes, which is really a waste of billions of dollars in infrastructure money that you spend to move a small amount of people,” he explains. “I think those two things really go hand-in-hand.”
Myers notes that there should also be a focus on rethinking how our suburbs are built. This could provide denser housing options, a diverse range of unit types and social housing projects in greenfield development areas, which are undeveloped lands located between the protected Greenbelt and existing built-up regions.
“The number one thing is just allowing more density and more housing types. If we can get wood-frame, lower-density product in more areas, that’s the key,” he says.
“High-rise towers, concrete towers that have to go four storeys underground and take five, six years to build, they’re higher-risk developments and they’re very expensive, so we have to try and figure out how to do infill cheaply and get as many properties built as possible,” Myers adds.
